What is OTT Advertising and How Does it Work
- How Over The Top (OTT) is different from IPTV?
- The benefits of OTT and IPTV
- What is OTT Advertising?
- How to create affordable OTT advertising campaigns
- How is Over the Top Advertising Delivered?
- Why is OTT Popular Now and How Does it Impact OTT Ads?
- Benefits of Over the Top Advertising
- Challenges of OTT Advertising
- OTT Ad Insertion Methods
- Tags Used for Communicating With OTT Devices
- The Future of OTT
- How to buy OTT ads programmatically
- The last word
The way audiences watch television has fundamentally changed over the past decades. Some said that the era of traditional TV ads is over.
Still, what we have now is not the end of traditional television but rather a shift in viewing habits. In the 1950s and 1960s, families would gather around their TV sets after dinner and watch Walter Cronkite.
A decade later in the 1970s, when subscriptions came along, linear broadcasting was replaced by cables, and it was not too long before Internet-powered gadgets and phones came along.
That’s where OTT (stands for over the top) advertising and TV ad tech platforms popped up on the scene and changed the relevance of online advertising on TV once and for all.
The viewers watch all of the content that is being broadcasted on TV in new locations and ways because now they have a connection to the Internet. This gave birth to the umbrella term called “Advanced TV”.
All of the new broadcasting methods include CTV, Addressable, and Over the top. The notions are often used interchangeably, but they have their differences.
Connected TV (CTV)
The word “connected” is referring to an Internet connection and this term can be applied to any TV set that is by any means connected to the web.
CTV is also enabled by gaming consoles, PlayStation, Xbox, Amazon Fire TV, Apple TV, online TV streaming services like Netflix Hulu, Smart TV, and cable providers. Read more about Connected TV Advertising here.
This method delivers specific content to a specific OTT audience. Think of it as content with the “address” of a specific audience on it. Addressable TV is enabled by the same technologies as connected TV. Read more about Addressable TV Advertising here.
OTT (over the top)
This method allows advertisers to deliver content to those people who do not want to pay for cable. This form of contention is currently in demand and offers many advantages to both TV advertisers and viewers.
How Over The Top (OTT) is different from IPTV?
From the technical standpoint — both IPTV and OTT services will process requests and deliver content through the Internet protocol.
However, the OTT content will go through the open network and the IPTV service will use a private network that can be managed. This makes OTT and IPTV streaming video services very similar if we talk about technology.
Typically, IPTV services are delivered by an Internet provider. Therefore, one IPTV service cannot be used with two different providers. One company typically distributes Internet and IPTV services at the same time. Nevertheless, both of these options allow bypass traditional TV providers.
The benefits of OTT and IPTV
With OTT streaming services customers access:
- Very affordable streaming content for the pricing that typically reaches $5-10 per month;
- No specific equipment is needed for streaming — just a phone or a tablet will work (although Apple TV and special streaming TV boxes improve the quality of experience);
- Variety of programming options, like multichannel video programming distributors (MVPDs). Services nowadays offer lots of options when it comes to original programming.
Meanwhile, customers use IPTV streaming services because:
- They offer an uninterrupted and glitch-free experience due to the fact that private network broadcasting is more controllable;
- Programming: on-demand viewership is very convenient;
- No specific equipment is needed for streaming, only a set-top box (if you already have a broadband Internet connection).
What is OTT Advertising?
Before we get into details, it is important to get an OTT advertising definition. OTT advertising is individualized streaming content provided to the viewers' TV sets while they watch the same TV show. Thus, OTT advertising is a targeted ad delivery on Internet-CTV sets enabled by programmatic OTT over the top technology.
Thanks to OTT, advertisers can expand their audience reach that previously was only available on linear TV (while optimizing the campaign budget). In fact, some experts predict that the money coming from OTT ads will increase anywhere from 45-60%.
Therefore, if you are an ad tech pioneer and you know how to launch effective OTT marketing, you will be reaping great rewards in the near future.
What do OTT ads look like?
OTT ad units are not always skippable and they are usually watched until the end. Most frequently those online video ads overlay video content helping brands to share their brand messages with unique and relevant audiences.
For programmatic platforms that support various kinds of ad formats serving a video advertising or banner creative won’t be a problem. At the same time, OTT video ads and banners are so far the most common ones.
With time, when CTV and OTT capabilities broaden up it will be possible for advertisers to launch ads dynamically. It will be possible to use interactive creatives, the ones that users can interact with on the TV screen — tap to open, skip, etc.
How much does it cost to serve creatives on OTT medium?
Well, it depends. Bets are high that the majority of marketers might think that serving online ads on OTT over the top is a very expensive thing. Sure, television commercials are pretty demanding and have a much higher impact on viewers.
These ads are ideal for creating a good brand recall because big-screen TVs create an immersive experience. However, choosing a suitable TV advertising solution and correct campaign planning might be the key to running an effective yet affordable OTT ad campaign.
How to create affordable OTT advertising campaigns
Make a research on ad platforms
If the platform offers advertising on OTT, compare their prices and targeting capabilities, and find out if the inventory they offer matches your quality criteria for suitable ad placements.
See what creatives they offer
Some companies offer lots of creative configurations. Videos, banners, and rich media ads. If you run a video creative look for shorter-duration options. For instance, popular 5-second online video ads will cost way cheaper than broadcasting 20-second creative.
Exclude irrelevant impressions
If you don’t set the targeting it means you show ads to the people to whom your product or service is irrelevant. Narrowing down your audience with targeting will help you to increase the likelihood of conversion and decrease ad spend.
Use in-built OTT platform tools to generate reports and analyze what works and what doesn’t.
Limit the frequency
On programmatic platforms, advertisers can limit the number of times the ad will be shown to the user (per day) — ad frequency. This way the ad won’t appear annoying to the users and will also prevent you from overspending.
How is Over the Top Advertising Delivered?
The delivery method depends on the live TV streaming service and how their platforms interact with OTT devices (whether it is Roku, Amazone Fire TV, Amazon Prime Video, Apple TV, YouTube TV, or something else).
For example, this could be through the Video Ad Serving Template (VAST) since OTT video content is very popular. In this case, the ad insertion could be performed via server-side (SSA) or client-side (CSAI).
How do SSA and CSAI work
- Firstly, the audience for your OTT advertising campaign is created. The composition of this audience will be based on the data obtained from the platform. In some cases, this data can be enhanced to include additional information about the household.
- Launching of the campaign. The ad platform will connect the audience to a particular TV subscriber list across all OTT platforms.
- The ad-supported streaming video by OTT ads platforms will be channeled to the audiences. Various tags will be used to tell the OTT media player how a particular ad should appear to the viewer. At this stage, all of the information is received and processed by the player that streams video content.
- The final stage involves the OTT ads platform sending a report back to the advertiser which contains all kinds of statistics and metrics about the ad which is a key to determining whether the ad campaign was successful or not.
Why is OTT Popular Now and How Does it Impact OTT Ads?
One of the reasons why OTT advertising is on the rise is because there is an increasing amount of dissatisfied paid TV customers.
While there are many reasons why people are not happy with the cable network provider, there are gradually more and more options becoming available to consumers who want to get rid of linear TV.
OTT can provide them with a wide variety of payment and viewing options which allows the viewers to free themselves of contracts that their cable providers locked them into. In the end, the pay-TV providers are not agile enough to keep up with user demands.
What do the viewers prefer? Computers, tablets, and smart TVs changing the game
Around 164 million U.S. TV watchers access content using connected TV (CTV) gadgets, and this number will grow to 205 million by the end of 2022. For the consumer, one of the biggest benefits of OTT is being able to stream video content over many devices. Over the years OTT apps grew more popular. A lot of the OTT apps let people enjoy content on their computers, tablets, smart TVs, and even gaming consoles.
There have been many studies done to determine which of these multiple devices the viewers prefer to use and determine which type(s) of content is best suited for which streaming devices; the point is that the user is presented with a seemingly unlimited viewing selection both in terms of content and platform.
Benefits for advertisers
For the marketer or advertiser, the biggest benefit is that people who are watching content on OTT advertising platforms cannot skip ads, close a window, install some kind of ad-blocking software, or any other ‘ad shield’.
Interestingly enough, metrics such as the click-through rate are totally irrelevant when it comes to OTT since it is not possible to click on a TV screen and interaction with an ad is rare.
OTT video ads completion rate is sky-high on OTT platforms and cannot be compared with much lower numbers of in-browser ads.
Here is a bunch of the latest OTT statistics with several important predictions:
OTT usage statistics
- The overall worth of the OTT market is predicted to grow by $1.039 trillion by 2027;
- When it comes to video streaming, the majority of people prefer to use mobile and tablets rather than desktop devices;
- The most popular device used for OTT streaming in 2021 is Roku which accounts for 27% of overall TV watching in North America;
- OTT streaming increased by 115% in 2021 when compared to the previous years;
- According to the Statista report, around 51.58% of OTT market revenues come from video-on-demand (AVOD), and 40.16% from the subscription-video-on-demand model (SVOD). Transactional Video-On-Demand (TVOD) generates 5.1% and 3.16% comes from video downloads. It shows that transactional video-on-demand (TVOD) clearly loses out to subscription video-on-demand and video-on-demand;
- According to eMarketer, around 30.8% of all subscriptions come to the most popular OTT streaming service — Netflix.
We have already investigated the popularity of OTT, but what about the OTT ads themselves? OTT advertising ecosystem has some specifics.
According to TDG research, currently, the average length of an ad is 3.2 minutes, and it will rise to 5.1 minutes. The total ad spending on OTT will reach $2.373 billion by the end of 2025.
Right now, there is a lot of money being made on video-on-demand content, but interestingly enough OTT subscription video devices are responsible for this flow of revenue. In the same way, the ad revenue is made on OTT ad space.
Stats important to know if you plan to advertise on OTT
- Advertising on OTT is quite profitable — it accounts for around 51% of OTT market revenues;
- On CTV devices, the share of programmatic impressions increased by 13% in Q1 2021 (compared to the previous quarter);
- Having several screens at once, 65% of users will browse the product information using an additional screen. Meanwhile, they will watch digital content using the main screen;
- 43% of U.S. citizens agree to watch ads in exchange for free content;
- OTT digital video advertising revenue per user will be boosted by 72% during the next couple of years. By 2025 it will reach $52.25;
- According to the CTV & OTT landscape survey by Business Intelligence, we can expect the following change in video ad spend in the next 12 months:
Benefits of Over the Top Advertising
OTT advertising is a win-win for everybody involved in it. Consumers love it because they no longer have to pay for TV that is limited in terms of content and convenience.
Advertisers love it because it has massive revenue potential and because such targeted TV advertising can raise brand awareness significantly. In addition to this OTT also offers:
Targeting. OTT enables shorter but more relevant ads because it knows where the audience is located geographically. OTT platform can break the audience into segments for better metrics, and it can tell you which device(s) the viewers are using most often to access your content.
Dynamic ad insertion. This lets you interchange banners or video ads in linear, live, or video-on-demand content. VOD or video-on-demand is a media distribution system that enables accessing videos without traditional video playback devices and limitations of traditional broadcast advertising like broadcasting schedules.
Advanced analytics. With all of the data obtained about your OTT audience, you can find which OTT ads are working for you and which ones are not to optimize future ads with the insights you obtained.
Challenges of OTT Advertising
As we found out earlier, there are many advantages that OTT can offer you that traditional TV advertising cannot, because linear TV is limited in its options.
However, there are still some problems that need to be resolved before we can finally declare that OTT advertising is a perfect digital advertising medium.
Management and measurability
Right now, if advertisers want to create OTT content, they can only channel them through cable TV providers or OTT platforms. In case you chose cable providers there will be no opportunity to manage the ad in real-time as well as no chance to measure performance metrics.
On OTT platforms it is still difficult to measure engagement and user reaction since OTT ads are not measured by such metrics as clicks. However, an OTT ad supported by programmatic platforms can be measured according to several metrics commonly used in ad tech; cost per thousand impressions (CPM) is the most common of them.
OTT advertising is kind of the Wild West, i.e. there are no rules or regulations that govern the quality of OTT inventory and OTT media so far.
Ad fraud prevention here is very important. While it is not as vulnerable as something like desktop computers, ad fraud has managed to find its way into OTT and could pose significant problems if protective regulations are not in place. This includes things like invalid traffic detection, standard naming practices, and many other conventions.
A lot of OTT devices do not have the same functionalities as web browsers. For example, if you run an ad creative in an Internet browser, you can obtain all kinds of information from the tracking pixel or cookie that will give you the insights considering conversion rate of a particular source.
This is not possible right now on some OTT devices. VPAID was introduced to enhance ad experiences and provide ad performance insights. We should point out here, that due to the restrictions of OTT platforms, often you cannot implement executable ad units.
OTT Ad Insertion Methods
Client-side ad insertion (CSAI) is the old method when the advertiser inputs the ad into the platform before the viewer sees it. Even though today most of the ads are served to the viewer through this method, there are some drawbacks.
First of all, there is an excellent chance that your ad will get caught by the ad blocker and will never get to the viewer. Also, it features lower-quality of streaming services because the player often switches back and forth between OTT content and advertisements.
SSAI or “Stitching”
SSAI stands for server-side ad-insertion content delivery. By utilizing this method, you can display the ads to your audience without any interruptions. In essence, it is a real-time combination of the ads and core content.
What’s great about this method is that the viewer sees it one frame at a time, thus making it difficult for ad blockers to spot.
SSAI gives the audience an opportunity to view live content without any interruptions because the content itself is stitched together with the ad. This way there are no random pauses or gaps in between. If you would like the ads to be clickable, it is possible to do so, but this will require additional work.
There are many providers out there who underestimate ad insertion functionality. However, some OTT advertising platforms go above and beyond in order to provide their clients with metrics and interactivity that feature VPAID tags built-in.
The ‘stitching’ that we’ve mentioned earlier is a win for the viewer, but it also sets some restrictions on the advertiser, since advertising technology is still built on client-side methodologies.
Tags Used for Communicating With OTT Devices
OTT advertising is specific because it demands different standards. The VAST tags are important because they determine how the OTT video ads will display. They tell the player everything, starting from where the ad should appear on the screen, for how long, and everything else concerning the ad’s appearance.
Video Player-Ad Interface Definition (VPAID) tags build on the capabilities of VAST and they make the ad interactive and add metrics. However, there is a big caveat; stitching is not an option here. This could pose significant problems since you will have to find a detour around all of the pre-rolls that are currently being offered in Europe.
Still, perhaps the upside is greater with this method because it provides better insights and metrics in terms of viewability and might even offer some interactivity. Therefore, if the stitching is not a deal-breaker for you, this could be the best option among all other tags.
The Future of OTT
The future of OTT advertising is bright despite all of the obstacles. The IAB (Interactive Advertising Bureau) sees the development happening in stages, kind of like what we saw with programmatic buying platforms years ago.
Most providers that offer streaming services like Netflix or Hulu receive the biggest portions of their revenue from subscriptions the customers are paying for.
This is great because the advertisers will know where their audience is located and therefore, will be able to tailor their offers much better. Those who don't have such data will have to rely on data obtained from third parties which will probably not be as accurate.
Streaming services and precise targeting
In the next round, the targeting will remain based on the audience’s viewing data obtained from the provider or the streaming service (geo, device type, etc).
In addition, ad-supported OTT services allow matching devices with other ones located inside the users’ homes substantially enhancing this data with information about browsing and online shopping history to make the targeting even more precise. That's when advertisers will start to buy OTT massively.
Soon OTT ads will be available for both private and public auctions on any demand-side platform that supports these creative formats. This will allow brands to get the most out of their ad campaigns by targeting based on intent. As well OTT supports retargeting capabilities.
The viewability will also increase because the OTT content offered to these audiences will be better suited to products they are interested in. Serving OTT ads via SSP will also be beneficial for publishers who want to keep their users engaged instead of repelled. Below you can see types of programmatic TV and what it supports.
How to buy OTT ads programmatically
Just like content serving, advertising on OTT medium can be organized in various ways, however, advertising platforms based on programmatic technology (e.g like Amazon advertising for Amazon fire TV or Amazon prime video, or Google ads for YouTube TV) have become increasingly popular because they deliver automation, campaign precision, measurability, and targeting.
Why do advertisers and marketers prefer to launch their OTT campaigns through programmatic platforms? Well, there are a lot of reasons, here, just to mention a few:
Programmatic demand-side platforms help advertisers to buy ads without inventing tremendous resources in the search for the right media.
DSPs automate and simplify media buying automatically filling ad placement based on campaign criteria (targeting, available budget). This helps to achieve better ROI and campaign effectiveness with a humble budget.
Programmatic OTT platforms make TV advertising as measurable as ads on the web. They apply a definite set of metrics for assessing campaign performance. The most popular of those are impression metrics since OTT ads are usually used for branding campaigns.
Setting the most precise targeting
CTV in general is a highly targeted medium. While cooperating with advertisers, cable TV providers also equip them with necessary targeting data about households.
However, barely anything can measure up to programmatic targeting capabilities that may include dozens of targeting criteria with data provided directly by connected publishers (geo, device type, language, age range, etc).
The last word
Even though OTT offers a wide array of possibilities, it will definitely provide even more in the future since streaming services and ad technologies continue to evolve.
If we take into account this, we’ll understand that OTT advertising will occupy a much larger market share in the future, especially when it comes to OTT video content.
Harnessing this new technology and leveraging it to its fullest potential will become a priority for many businesses; brands will buy OTT inventory and advertise on it since there’s nothing more engaging and immersive for users than big-screen TVs.
Merge traditional mediums with OTT advertising opportunities. Advertise on connected TV globally on SmartyAds DSP!
Irina Kovalenko, CMO of SmartyAds